Go Fashion (India) Ltd (NSE: GOCOLORS) Q3 2025 Earnings Call dated Jan. 27, 2025
Corporate Participants:
Gautam Saraogi — Chief Executive Officer
R Mohan — Chief Financial Officer
Analysts:
Devanshu Bansal — Analyst
Prakash Kapadia — Analyst
Sameer Gupta — Analyst
Gaurav Jogani — Analyst
Akhil Gulecha — Analyst
Ankit Kedia — Analyst
Tejas Shah — Analyst
Prerna Jhunjhunwala — Analyst
Aradhana Jain — Analyst
Presentation:
Operator
Ladies and gentlemen, good morning, and welcome to the Gold Fashion India Limited Q3 FY ’25 Earnings Conference Call. As a reminder, all participant lines will remain in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star then zero on your touchstone telephone. Please note that this conference is being recorded.
I now hand the conference over to Mr Gautam Saraoki, Chief Executive Officer. Thank you, and over to you, sir.
Gautam Saraogi — Chief Executive Officer
Good morning and warm welcome to everyone present on the call. Along with me, I have R Mohan, our Chief Financial Officer; and SGA, our Investor Relations Advisors. I hope you all have received the investor deck by now. For those who haven’t, you can view them on the stock exchange and the company website.
The apparel retail demand remains weaker-than-expected, driven by underwhelming festive season and decreased consumer spending on discretionary items. Despite the same, we had Go Colors continue to meet expectations and have continued to maintain our growth trajectory. Revenue from operations for the nine months grew by 11% to INR643 crores with the EBITDA which grew by 9% at INR206 crores. Same-store sales growth remained flat, reflecting the subdued market environment as highlighted higher heightened inflation prompted customers to postpone discretionary apparel purchases. Despite this, we upheld good P&L hygiene and achieved impressive EBITDA margins of 32%. This performance was through strategic cost-control measures and disciplined discounting practices, demonstrating our ability to maintain profitability irrespective of the challenging demand landscape.
Our full-price sales ratio accounted for 95.1% in a challenging demand environment. This underscores strong consumer loyalty and acceptance of our product and pricing. Our brand’s ability to not rely on discounting sets apart from our peers. Over the last few quarters, large-format stores segment have encountered some challenges, reflecting shifting market dynamics and evolving consumer preferences. However, we remain confident in the resilience of this space and anticipate strong rebound in the coming quarters driven by strategic initiatives and improving market conditions. As of December, our average selling price stood at INR769, driven by favorable shift in our product mix.
Over the years, we have seen significant transformation in our mix from our earlier reliance on leggings and dogs. This shift underscores the strong market acceptance of our value-added products and reflects our evolution and comprehensive bottom web brands capable of catering to diverse customers across all categories. Our strategy remains focused once being on one-stop solution for all of women’s bottom, offering a broad selection of products at affordable prices to a diverse customer-base. These — these factors will support our growth trajectory moving forward. I’m also pleased to share that we are on-track of opening our first store in Dubai and our store should open by April 2025 through Apparel Group.
Moving on operational metrics of Q3 and nine months FY ’25, our — as advertising spend as a percentage of revenue stood at 1.9% for the nine months. We have strategically taken a call to keep it intact because of the sluggish demand environment. They continue to rationalize our smaller stores and plan to phase-out another additional 10 to 15 stores in Q1 this year. This would be the last set of small stores closers. Based on observation, we are confident that the sales from the smaller stores will eventually seamlessly transition into the larger stores. In-line with the approach, we opened 61 new stores, net stores on a net basis for the nine months FY ’25 and for the full-year, we plan to do a total between 80 to 90 net additions.
Our EBIO channel revenue for nine months FY ’25 stood at INR463 crores, reflecting an 8.5% year-on-year increase. This growth can be attributed to the core nature of the product offering, which has been less impacted by the sluggish demand compared to other categories. Given our diverse portfolio and large amount of SKUs, we continue to maintain a decent inventory levels at 99 days as of December 2024. For the full-year, we anticipate our inventory days to stabilize between 90 days and 95 days, ensuring operational efficiency and healthy working capital management, generating decent and high operating cash flows. Our strong focus on inventory and working capital efficiency will help us achieve our target of converting more than 50% of our EBITDA into operating cash flows. We are — we are on-track to achieve the same for FY ’25.
Way forward, our first step is to be achieve low single-digit SSST in FY ’26. Second would be grow our footprint increasing with the number of stores in our portfolio. For FY ’25, we aspire to open around 80 to 90 net addition store openings. Going-forward, next year, we aspire to open anywhere between 120 to 120 to 150 net additions for the next year. Lastly, our focus would be to maintain strong check on inventory levels, leading to healthy balance sheet and working capital and improved cash flows in the business.
To conclude, the women’s organized bottom segment in India is poised for significant growth despite the current tough environment. As fashion trends evolve, there is a growing preference for versatile and comfortable products, which are not only known on occasions, but are everyday in nature and core in nature, which cater to both casual and professional settings. Furthermore, India’s expanding urban middle-class, increased disposable income and greater awareness of global trends are likely to drive consumer spending in the segment. As these dynamics continue to unfold, we are set to capitalize this growing opportunity and fuel our growth trajectory forward.
With this, I would like to hand over a call to our CFO, Mr R Mohan, for the update on Q3 and nine months financial FY ’25 results and financials. Thank you.
R Mohan — Chief Financial Officer
Thank you, and good morning, everyone. Despite the challenging business environment, the company continues to witness a strong operating performance. First, I’ll give you our financial highlights for Q3 FY ’25. Our revenues for the quarter stood at INR215 crores as against INR202 crores in Q3 FY ’24, a growth of 60% Y-o-Y. Gross profit stood at INR130 crores, a growth of 11% year-on-year with a GP margin of 64.1% for the quarter. Our EBITDA for the quarter stood at INR70 crores as compared to INR68 crores in Q3 FY ’24, a growth of 3% Y-o-Y, our EBITDA margin stood at 32.5%. Profit-after-tax for the quarter stood at INR24 crores and witnessed growth of 4% Y-o-Y. PAT margin stood at 11.3%.
Coming to the Nine-Month FY ’25 performance, revenue stood at INR643 crores in nine months FY ’25 as against INR581 crores in nine months FY ’24, a growth of 11% Y-o-Y. Gross profit stood at INR4.5 crores, a growth of 14% Y-o-Y with a GP margin of 63% for the nine months ended. EBITDA for nine months FY ’25 stood at INR2.6 crores as compared to INR189 crores in nine months FY ’24, a growth of 9% year-on-year. EBIT — our EBITDA margin stood at 32%. PAT for nine months FY ’25 stood at INR74 crores as compared to INR70 crores in nine months FY ’24, a growth of 6% year-on-year. Our PAT margin stood at 11.4%. ROCE and ROE excluding India’s impact as on nine months FY ’25 stood at 20.3% and 15.8% respectively. Cash-and-cash equivalents stood at INR231 crores as on 31st December 2022.
With this, we now open the floor for the question-and-answer.
Questions and Answers:
Operator
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question comes from the line of Devanshu Bansal from Emkay Global. Please go-ahead.
Devanshu Bansal
Hi, good morning. Thanks for taking my question. Firstly, I wanted to understand the trends — growth trends have remained muted and it is also slightly weaker than our own expectations during the course of the year. What are the reasons for this? And also if you could highlight if there is any significant growth divergence across regions for you.
Gautam Saraogi
Sure, sure. Thanks for the question. So, see, I think the difference while this Q3 has been a little bit of a weak performance is because of the festive. I think festive was far lesser than expectations and we’ve done a channel checks as well, which is — and it has been consistent across different, different retailers we have checked. That festive was quite disappointing this time. But what was good about this quarter was that December onwards, the growth trajectory and momentum was good like post December 15, demand has actually picked-up well. And post December 15, we’ve seen decent demand, but this entire festive and post festive leading up to December 15th has been very subdued.
Now as far as region-wise understanding, see, look, I think you know there are some positives which have come out in Q3 for us is North has actually reported positive FSSG. West India also has reported positive. South has been a little bit of a drag for us. Yeah. One of also the reasons for South having a little bit of an underperformance in Q3 because of extended dreams. See, regions like Kamaladu, Karnataka, especially in Tier-2, Tier-3, the rains actually — the monsoon actually continued into December. So some part of December sales actually kind of weakened the sales for South. And that’s why South Q3 SSSG has been a little on the weaker side. But the positive side of this quarter is that West India has had actually a low single-digit SSSG and North India actually has had mid-single-digit SSSG. So we are seeing some kind of improvement in-demand when it comes to West and north of India.
Devanshu Bansal
Understood. That is helpful. Just a follow-up on this. So I noticed that particularly for Q3, the full-price mix is 95 versus last year it was closer to 98%. So this demand environment, which you are indicating after December 15, is this also due to start of early USS this time around? Can we attribute this to that?
Gautam Saraogi
Yeah. Yeah, I think, look, because festive was a little weaky in our case, we actually didn’t start USS very early. We started around the same time which we usually start. But overall market, USS this time started a little early because of subdued demand and.
Devanshu Bansal
Okay, okay. And what I mean, other categories at least like foodservices, we are noticing that there is big consolidation happening from competition perspective, right? So there is prolonged slowdown and there are lot of store closures that are happening around the state. So is the aerospace also seeing store closures for competition as well because of prolonged slowdown?
Gautam Saraogi
See, well, there is honestly, not only competition, if I see among all peers in retail, I think many brands are in consolidation mode because of slowdown in overall apparel and footwear space. So there’s a lot of consolidation happening because the same-store sales growth are weak, right? People usually tend to consolidate to maintain margins. In our case, we have — we have done some little consolidation as far as small stores are concerned and we look to close another 10 to 15 stores in Q4, post which I think we are largely done with our consolidation.
So from Q1 onwards, for the next financial year, we will probably see store closures in low-single digit or mid-single digit. It’s not going to happen what happened this year. So next year, like this year, we are going to-end up with an 80 to 90 net additions, which was actually lesser than what we had targeted. So on a gross level, we are actually closer to 120 this year. And because of our closure, we are going to-end up between 80 and 90. Next year because it’s going to be mid-single-digit closures, which happens in the normal-course of business, we are very confident that we’ll be closer to that 120 now without any problems.
Devanshu Bansal
So I have more questions I’ll join back-in the queue moment.
Gautam Saraogi
Sure. Thank you.
Operator
Thank you. The next question comes from the line of Prakash Kapadia from Spark PMS. Please go-ahead.
Prakash Kapadia
Yeah. Two questions from my end. Gautam, you mentioned about SSG being muted. So you know still not able to understand the actual reason for a flat SSG because we’ve been anticipating the demand to come back. So what is really hitting SSG growth? And historically, if I see Q4 is not a very big quarter. So as we move forward, how do the next few quarters in terms of demand or sales look like? Are there any initiatives internal, which we are trying to boost demand or you think the environment is now better? You alluded to some demand coming back, but some sense on revenue growth going-forward will really be a?
Gautam Saraogi
Yeah, sure, sir. Definitely. So see, to start-off your question on SSSG, right? I mean, look, in this demand scenario, honestly, the fact that we are at flattish SSSG is actually in my eyes, a very decent achievement. If I look around whatever channel checks have done, of course, there are some exceptional players in the market who have done double-digit as well. But many retailers, many brands have actually had negative SSSG during these last couple of quarters. So I think in the overall scenario, I think we maintaining flattish SSSG, maintaining demand in our existing stores. I think we’ve done a great job. But the idea is obviously to move towards positive SSG.
So moving forward from strategies perspective, see, couple of strategies what we are adopting right now because we know that the environment is tough, though we have always been a cluster-based expansion model, we are also now trying to control our cluster-based expansion model and trying to do more horizontal growth rather than vertical growth. So I think in the past, we went very deep in clusters and opened more number of stores. I think we will continue our cluster-based expansion model in a more controlled way.
I think like — so for example, in a market where we see a potential opening four small stores or four medium-sized stores in a particular vicinity, we will open three medium stores instead of opening four small stores. So the idea is to control the customer-base expansion model so that we don’t end-up cannibalizing. So that is one of the strategies. And moving forward also from a — from a growth perspective, I think next year we’re looking at a double-digit company revenue growth with a mid-single-digit. And for Q4, we will target a low-single decision and company is working towards that goal. How we can make this positive?
Prakash Kapadia
Okay. Okay. Okay. Fine. Thanks.
Gautam Saraogi
Thank you very much.
Operator
Thank you. The next question comes from the line of Sameer Gupta from India Info Line. Please go-ahead.
Sameer Gupta
Hi, hi, Gautam and team. Thanks for taking my question. Firstly, I’d like to dwell a little bit on SSSGs like other participants. So it’s been flat now for six quarters. Now I understand that overall consumption hasn’t been in the best of health. But for a brand which is relatively small and young, it still seems an underwhelming performance. You also give some same cluster growth and I see that has also now started to moderate, used to be around 8% to 10%, now it’s around 5%. So apart from the broad consumption, which may take some time to revive or we don’t have a handle. What are the steps that you are taking as a company to revive this growth? Are there any pilots that are you are doing? I understand that the bigger problem is footfalls right now. So any color on your own strategy, your own initiatives will be helpful.
Gautam Saraogi
See, I’ll tell you two things we are doing — two things we are doing, Sameer. And one is, like I just mentioned to Prakash as well on the — on the expansion part, we are not trying to go very deep now. We understand that demand scenario is weak. If we try to go very deep in cluster-based expansion model, I also don’t want to-end up cannibalizing my own stores. So we are going more horizontal. So whatever expansion we are going right now, we are also trying to go to newer cities, new towns, so that it is new growth which is coming into the revenue channel. And we are not opening the very small stores right now.
What we have experienced when we open our mid-sized stores of 400, 500 square feet, the consumer is actually having a very good experience because of our extended product range in that 150, 200 square feet that experience is not coming. So we are also trying to open good experience stores of 400, 500 square feet and move away from the 200 square feet model. And also, like I mentioned, go more horizontal in expansion rather than going deeper into the same cluster. Second thing, I think, look, we as a company have done fantastically very well in cost-control. In a — in an environment where demand is weak, SSGs is weaker, actually operating margins and PAT margins have not seen too much of a decline. In fact, our absolute PAT has actually grown. I think as a company, our strengths have always been cost-control and future also, cost-control is going to be a big positive for us during this weakened environment. I think keeping these two initiatives in mind, if we keep these two initiatives on, one, demand revised, it was reflecting the top-line revenue as well and even on the bottom-line margins.
Sameer Gupta
This is helpful and that actually brings me to my second question. So I noticed that on the cost line that you said, so gross margin up 264 bps, including subcontracting, employee costs are up 26% and other expenses are up 16% if you exclude ad spends. So just trying to understand reasons for the increase in gross margin as well as the employee and other expenses, are the expensive as sir?
Gautam Saraogi
Yeah, yeah, sure, sure. So thanks for the question, Sameer. So on the GM part, Sameer, I think, look, I think it’s a product mix perspective also. Some of our products which had a slightly higher multiplier and higher GM, those products sold a little more than our other products that had one impact on the GM to go up. And on the cotton prices as well, I think we’ve had cotton prices coming down. And I think finally, we have seen the full benefit of cotton prices. So we have done a 64% GM in Q4. I think steady-state, we see a 62.5% to 63% GM on a steady-state basis. 64 has been a little on the higher side also because of some product mix which has sold well during festive, which had a slightly higher GM. But on a steady-state basis, we see 62.5% to 63% of GM on a steady-state basis.
So as far as salaries is concerned, which you very rightly pointed out, see, one of the reasons salary cost has gone up is see we’ve added — we’ve gone — we’ve added three LFS partners in this entire nine months. We added lifestyle, we added Shopper Stop, we added bank alones. So bank alone was already there, but we added more number of stores than. So we added about 70 to 80 stores. Lifestyle we added about 60 to 70 stores, we added 120 stores. So all these stores we have kept employees, which we usually do is just that these stores in terms of sales are not stabilized because they are fairly new to the roof. So that’s why employee cost on an overall basis have seen a sharp increase, but I see this employee cost stabilizing by Q1.
See, Q4 anyways is usually a weak quarter in retail, but in Q1, I see this cost stabilizing and this will come down in proportion to our revenue. So I don’t see that as a concern. As far as the other expenses are concerned, where my revenue has grown by 11%, but my other expenses has grown by 16%, see, I think most of these expenses is rent. My rent has actually grown at 13% versus my revenue going at 11%, which is a good thing. So there’s not a very big imbalance between my revenue and my rent. And my other expenses are just variable expenses, which are more linked to revenue anyway. So that also the is not a big concern, but Q1 it will stabilize. The salary part which are seeing a much larger infuse is largely on the basis of me adding more LFS stores, which are yet to get stabilized, which in Q1, we will see a good stabilization in those.
Sameer Gupta
Okay. Just a follow-up here. So by my calculation ad spend, if you exclude the other expenses of 16, so if rent is up 13, the other portion of other expenses will be up even more than INR16. So I mean — and if it’s more variable linked to revenue…
Gautam Saraogi
See, I think what has also happened is, you know, many malls, the electricity costs across states and the maintenance cost and HVAC costs across also malls have gone up over a period of time. And that is also impacted — in some sense, it is impacted the other expenses.
Sameer Gupta
Got it. So again, I’ll just dwell a little bit on this. So let’s just assume SSS growth stays where it is, where do you see the pay-based EBITDA margin bottoming out? Is it like currently it’s around 17% and this is a quarter of a higher revenue. So where do you see this stabilizing on an annual basis is…
Gautam Saraogi
See, I’ll tell you, I’ll tell you on this, Suneer. Now see, if I take for the nine months, I have — I have shut about 23 odd or 24 stores and my write-off in my — before my EBITDA is about close to INR4 crores. So this has also taken an impact on my EBITDA. So that’s why my other expenses are little higher. If I take my closures last year for the nine months, my total amount hit on my P&L was INR2 crores INR28 lakh and this time it is INR4 crores. So that has also resulted in the other expenses as a percentage going up. So on a steady-state basis, I think we will target a pre-ended EBITDA of about between 18% and 20% with at least being 18% going up to 20%.
Sameer Gupta
And this 18% to 20% is with a mid-single-digit SSS, right?
Gautam Saraogi
We are targeting to do a mid-sing — mid-single SST, correct. No, even if we do a low single-digit SSST, we are very confident that we will be able to achieve the 18% to 20% of EBITDA.
Sameer Gupta
Got it.
Gautam Saraogi
Our target is to do a mid-single, but even with a low-single, 18% to 20% pre-Index EBITDA is very much possible without any problem.
Sameer Gupta
Got it. And one last question if I may squeeze more bookkeeping. So over 30 to 35 store closures this year, I’m assuming, 10 15 will come in the 4th-quarter. How many of these would be relocations?
Gautam Saraogi
No, no, see, relocation happens in the course of business, I don’t have the exact number of relocations which are — which have happened this year, I don’t have a handy. I will give the data through HC and send it across. I had 23 store closures in this year. This 23 for the nine months are net of relocations.
Sameer Gupta
Okay. That answers my question. Got it.
Gautam Saraogi
Yeah. So ’23 is net of relocations.
Sameer Gupta
Okay. Fair enough. I will come back-in the queue for follow-ups. Thanks. Thanks a lot Gautam, for answering.
Gautam Saraogi
Thank you so much. Thank you.
Operator
Thank you. The next question comes from the line of Gaurav Jogani from JM Financial. Please go-ahead.
Gaurav Jogani
Thank you for taking my question. Gautam, question is again with regard to the Index EBITDA margin. Now if we look at the average for the nine months is around 17.5% and typically I have seen that your margins in Q4 dragged because of the lower sales and the operating deleverage that comes in. So taking that into consideration, I mean, it seems difficult to do even a 16% EBITDA margin this year. Because your employee cost, again, as you mentioned, has been elevated to some extent. So what gives you the confidence of taking it to 18% next year even with a low-single-digit.
Gautam Saraogi
No, I think — I think look, 18 — I think we should aspire to get 18% from Q1 onwards Gaurav. I think, look, Q1 is a good quarter and we also expect demand to pick-up a little bit. So I think considering — and plus we are not also going to have any too many store closures next year. So that cost in the P&L also will not be there. So I think we should be able to deliver 18% see if I — if I remove my store closures, which I’ve had, right, for the nine months, I have generated close to INR117 crore of EBITDA pre and is EBITDA with an 18.2% EBITDA. So currently my — without those exceptional expenditure or so closures, it’s about 18.2%. Considering next year are not going to have too many closures and demand also will pick-up a little bit, I think we should aspire to do 18% plus EBITDA next year.
Gaurav Jogani
Sure, Atam. I mean one of the key reasons here is the gross margins as well. I mean the gross margins, not taking the subcontracting on into consideration. Yeah, for the nine months has been around good 68% odd. And as you mentioned that right now the gross margins are a bit elevated and it might see some correction. So with this benefit kind of fading out or the gross margins level, still that number is doing?
Gautam Saraogi
See, I think — so Gaurav, I think we should always look at the GM post support ranking charges. I think that’s the right way of looking at it. So I think 63% is for the nine months and I think we’ll maintain between 62% and 63 moving forward. I don’t see a drop-in the GM. So I don’t think it will be to the extent of the 64 what you saw in Q4 — sorry, in Q3, but I think that between 62% and 63 will maintain in moving quarters, which earlier in fact, earlier times used to be at 61, now it will be between 62% and 63%.
Gaurav Jogani
And Gautam, just one question on the demand-side as well. You know, we are seeing most of the apparent guys getting aggressive, especially the value fashion retailers in the apparel side, posting good double-digit kind of in SSSGs across-the-board. Now these players also typically they tend to sell bottoms and somebody like even they have the bottom wear offerings with them. So do you think there is also some impact from size or the overall demand that they might be thinking some share from it?
Gautam Saraogi
See, I don’t think so, honestly. See, our customer comes in for our quality and comfort and our range. And with all due respect, I think the other value format retailers also have a good range in top and bottoms with good-quality. So I don’t want to — I don’t want to say anything negative about that. But our customer comes to our stores because of our range quality. And I think our impact on revenue is largely to do with the overall demand rather than any competition in value detail policy?
Gaurav Jogani
Sure. And my last question is with regards to the LFS addition. I mean this quarter around there were good LFS closures that we had seen. So anything on that? I mean, how do you look at your —
Gautam Saraogi
Actually what happened, Gaurav, is that the stores were under renovation, so one of our large formats or partners, about 80 to 90 stores have actually gone under renovation and it is temporarily closed. So that is why that number is reflecting lower in our number of LFS stores which we have reported. We have not really shut any LFS stores because in fact, we’ve added through lifestyle platform and all. It is just that one of our LFS partners 80 to 90 stores going under renovation and that is why it shows the reduction in that LFS number.
Gaurav Jogani
Okay. So that would have also some impact on the revenues as well, maybe another operating this.
Gautam Saraogi
Yes, to a certain extent, not much because it’s only 18 90 stores and LFS being only 21% to 23% of the business, it wouldn’t have had a very large impact on revenue, but yes, a small impact would be there.
Gaurav Jogani
Thanks very much.
Operator
Thank you. The next question comes from the line of Akhil from Capital. Please go-ahead.
Akhil Gulecha
Mine got. So my question is around the industry landscape and how it is evolving. So if you look at the ASP has increased and the SSSG is zero. So that basically means there is a volume degrowth. So you’ve been in this industry for over a decade, you understand it very well. So have you seen such a situation before where we had a couple of years of flattish SSSG and volume degrowth and typically, how long does it take for the cycle to turn-around and people to start buying more and the volume to start increasing at low-single digits or even double-digit volume growth.
Gautam Saraogi
So Akhil, very rightly you asked. I think, look — so the first part of the question on the growth of ASP, right? So our ASP growth is actually on the basis of product mix and not price increase. So till it is based on product mix, our ASP has grown, the volume degrowth really does not concern. The volume de-growth would have been a big concern for me if the ASP growth would have come based on price hikes, which is not the case. It’s purely based on product mix. So the volume degrowth really does not concern me, it will stabilize in the coming quarters.
Now, so for a company like us, this is the first time we are facing this because I think this kind of a similar demand situation was there in 2018 and 2019, but at that point of time, we were a much younger company with a weaker base. So even though demand was weak, we still saw double-digit SECSG growth at that point of time because our base was small. Now after having a decently matured base, I think and having a demand — tough demand scenario out there, I think this is the first time we as a company are facing this over the last one, one and a half years. But having said that if I rewind my memory back I think that 18, 19 slowdown in-demand also eventually recovered this one is taking a little longer but there will be 100% there will be recovery. I’m very positive.
Akhil Gulecha
Okay. Okay. Understood. And my second question is just want to understand a mature level store economics. So if you take an average mature store, which has been in existence for three to five years, typically, what kind of revenues — I’m talking about EPO stores, what kind of revenues does it do? What are the gross margins? What is the store-level EBITDA, store-level ROCE that a store which is performing well does?
Gautam Saraogi
Sure. I think look, from a matured store perspective, see our average store does between INR90 lakhs to a crore, a matured store would be higher would be about maybe 1.3 crores 1.4 crores. I’m not having the numbers close to me, but it will be, I think in the range between 1.3 crore and INR1.5 crores. Gross margin profile would be similar across matured and non-matured. So gross margin would be 68%. So a matured store will deliver a store-level EBITDA of about 31% to 32% after that.
Akhil Gulecha
Okay, okay. Understood. Yeah. Thank you so much, and best of luck.
Gautam Saraogi
Thank you. Thank you, okay. Thank you very much.
Operator
Thank you. The next question comes from the line of Ankit Kedia from PhillipCapital. Please go-ahead.
Ankit Kedia
Gautam, couple of questions from my side. First is on the product side. While still 40% is coming from legging, what are we doing to capture the young audience say 18 to 30 age group do you see a in that segment, our growth is a little more muted compared to women. So are we seeing some mix change coming in the product where you think that’s where some slowdown is happening?
Gautam Saraogi
See, I think, look, at a mix level, we are doing a lot of work and the mix is not one of the reasons for the slowdown. Our mix is actually pretty — in last few quarters, our mix has evolved very well. In fact, what we are doing, Ankit, see, we as a brand are on age brand. We attract the Gen Z, we attract the millionaires well and the older audience as well. So we are a more of an all-age brand. So what we have done in recent times also is we have also introducing some core CR category self a score. So some core Gen Z products we are introducing about four to five products in our product portfolio. And I think that will also start attracting the Gen Z audience into the store and keeping that four to five Gen Z product, they’ll also start buying the other products as well.
So we understand the importance of Gen Z. See, we don’t want to be a Gen Z brand. Like I said, we want to maintain the positioning of a very high-quality all age brand, but we want those Gen Z to come into the stores and buy because that’s also a very large population. So I think once we introduce these products, we do the right visual merchandising around the stores, I think that will make a very big impact. And that actually ties back to the concept of doing a minimum of 400, 500 square feet. See, what was happening earlier launches, when we are having 150, 200 square feet stores, the display of products was a very big challenge.
Lady, when she was walking in, she does not know the different type of browsers which is there because there’s no visual merchandising, there’s no browsers. Now by doing a minimum of 500 square feet, we are creating a lot of browser space and visual merchandising for our value-added products, including the product. So I think once our store size is settle in, I think that also will give a good positive impact on our revenue growth.
Ankit Kedia
Sure. And just a follow-up on that is repeat versus new consumers, are we seeing repeat consumers are being intact or is it the new consumers which are seeing a slowdown? If you can give some data on that?
Gautam Saraogi
See, I think the largest issue for us is new customer acquisition has slowed down. And repeat — our repeat customers who are coming in to buy a bolars is very much there. I think when I compare this year data versus last year and the year before that, I think the largest issue, see, is that our drop-in because of the newer customer acquisition has dropped down during this tough environment. So I think that is what we are trying to fix right now. How are we able to get new customers coming in?
Ankit Kedia
Sure. My second question is again on the employee cost. Our check suggest on the variability of the employee salary, you have two weeks some things. So in the medium-term, say, one year out, how is that helping you? And what could be the revenue growth? I’m not looking at-cost savings, more on the revenue growth given that it’s going to be more variable in nature, how should we read that into SSSG?
Gautam Saraogi
See, I’ll tell you — so this is something which you actually do, Ankit, I’ll tell you. So, we are creating a variable component — additional variable component over and above what we have for our front-end employees with certain targets on SSSGs and overall growth. If they are achieving that target, there will be an additional variable payout for rights from the regional manager to the store person. Now how does that impact my P&L, when that it is stable only when certain targets are achieved over quarter one, quarter two or quarter three, if they are achieving those targets, then there is a payout, but employee cost as a percentage will not go up because it has resulted in an increase in revenue. So this new variable component which we are bringing in should go-live from Q1 and which will also bring in a big positive impact in our overall revenue growth.
Ankit Kedia
Some bump-up in SSH could be seen and this is across all our stores.
Gautam Saraogi
As well, I don’t know about across but on a blended average level, we will definitely see good positive based on this variability coming in.
Ankit Kedia
Sure.
Gautam Saraogi
But the variability payout will be only after achievement of the. So even in a worst-case scenario decision is not achieved, I don’t see my variable employee cost going up the quarter back.
Ankit Kedia
Yeah. My question was, are we seeing this new structures and employee salary across all our 800 odd stores, which we have right now?
Gautam Saraogi
Of course. See, it’s not a very big structure, there’s just a variable component which we are adding, particularly across — across all the stores of the country.
Ankit Kedia
Sure, sure. And my last question is on the some of the new product launches which we had done, be it denims or be it shorts or be it launch web how has been that response…
Gautam Saraogi
Doing well in the doing well doing well, but the base is small so very difficult to judge right now but definitely good positive response. Denims have actually done that.
Ankit Kedia
Understood. Thank you so much and all the best.
Gautam Saraogi
Yeah. Thank you so much.
Operator
Thank you. The next question comes from the line of Tejas Shah from Avendus Spark Institutional Equities. Please go-ahead.
Tejas Shah
Hey, hi, Gautam. Thanks for the opportunity. Gauram, my first question pertains to your views on-demand sentiment. Now despite initial expectations and this is for retail at large office, very strong quarter supported by a consolidated festive season, packed wedding calendar and then very robust winter, which it turned out to be. The actual performance for broader retail and for us also has fallen short. So theoretically, all the tailwinds were there in-place. So what’s your opinion on what’s your read on the demand sentiment? Are there any — because you called out that Southern part was actually a drag. So are there any nuanced based observation there A? And B, what would have changed after 15 December where you said that demand is revived and has that sentiment expanded to Jan as well?
Gautam Saraogi
So I’ll tell you, it’s very surprising, but nowadays, the way demand is behaving, should see the current demand scenario in Q3 was very weak. It’s a very tough environment. So there’s no shying away from that. It is very tough. But nowadays, particularly on your question what happened after 15th December, right? Nowadays we are seeing that stopping during smaller windows or period of time happens in a very, very large way. Very festive, there is a very, very big bump-up of sales. So if you — if you take the festive week and the week before that, it will be a 50% 60% increase compared to — compared to the preceding weeks.
So it’s not a gradual buildup to festive, that festive week and the week before that the sales have a very sharp V-type V type spike and then there’s a fall. I think the same thing we also saw in December, where most of December was very big and then we were heading towards Christmas and New Year, there was another very sharp spike in sales, which recovered the sales of Q3. Honestly, that if that spike wouldn’t have been there, the numbers would have been very weak. But the way the shopping behavior nowadays is happening, whenever there is a festival, those particular two weeks or three weeks window, there is a very, very sharp spike and not a gradual increase. And that basically answers the question of what happened post December 15. Now how is January — well, January has been fairly good. January has been actually doing well on a Y-o-Y basis. I don’t want to jinx it, but hopefully, February, March is good, we’ll end-up with decent numbers for Q4.
Tejas Shah
Okay. Sure. And is there any organized or restructured framework in how we measure our market-share whether this is relevant peer group or is it more anecdotal? Let’s say, if we would have lost market-share, will you figure it out at the end-of-the quarter or a monthly basis?
Gautam Saraogi
So Tejas, we are actually doing our study with right now as we speak. We did one during the IPO and it was long due. So in fact, the study is going right now. And hopefully by the end of Q4 when we are declaring the Q4 results, the new study on-market share, the overall market size, everything will be in-place.
Tejas Shah
Perfect. And last one, if I may., your whole point on smaller stores earlier sounded very — very quick. And if not to judge it by the results, what has happened? The hub-and-spoke model where you will recruit customer from your smaller stores and if they like the merchandise, they can land up in the larger stores was actually sounding very perfect on paper. So what wrong — did we get the consumer sentiment wrong or the aspiration from the brands are misaligned this format?
Gautam Saraogi
I’ll explain to this. So is it like that anecdotal, as an example what had given was for LSS. The consumer gets acquired in an LFS and then comes to an EBO. So that thing what I had mentioned of a small store is actually not small it was for LSS, like how we enter newer markets through large-format stores and then eventually those consumers move and buy also an EBO. Now why we have taken a certain step for a very small EBOs is, please see look our product range has expanded very well. And see today in-markets where we are having a small store and a medium-sized store. Just think of it as a consumer, right? You would want to go to the store which has a slightly larger experience, trial rooms are bigger. So very small stores, it’s very difficult to browse.
Having said that, I’m not shutting all my small stores because the small stores from a unit economics perspective still does very well for me. In-markets where I don’t have a mid-sized store or large-sized store and having a small store, those small stores are doing well, they’re growing and they continue to do well. So there’s no reason for me to shut every small store. It’s just that I have selectively shut those small stores which are coming up for renewals, which also had medium-sized stores in the nearby area as a consolidation perspective?
Tejas Shah
Very clear. Thanks and all the best for coming quarters.
Gautam Saraogi
Thank you. Thank you.
Operator
Thank you. The next question comes from the line of Prayerna Junjanwala from Elara Capital. Please go-ahead.
Prerna Jhunjhunwala
Thank you for the opportunity. Sir, I had just one question. I just wanted to understand how — how many stores would be opened in the existing clusters and which how many new cities or geographies you are trying to get into in the next one year?
Gautam Saraogi
See, I think Brina, very rightly you asked, we are using a more — we are using a wider approach now rather than just keep growing in clusters. We are going to grow in clusters. That’s been our expansion model, but in a controlled way. So I think earlier it used to be a 50-50 approach. Maybe now it’s a where 40% might come from existing clusters and 60% 55% would come from newer markets.
Prerna Jhunjhunwala
Okay, understood, sir. Thank you. Thank you and all the best.
Gautam Saraogi
Thank you so much.
Operator
Thank you. The next question comes from the line of Devanshu Bansal from Emkay Global. Please go-ahead. Devanshu, if you can please unmute your line and proceed with your question.
Devanshu Bansal
Yes, hi, sorry. Thanks for the follow-up opportunity. I noticed that there has been an increase of 6, seven days in the creditor days. So this gain significance as receivables are only for 20% 25% of our business, right? So any comments there as in what led to this increase?
Gautam Saraogi
Yeah, sure, sir. So Vidiwanshu, what has happened is because it has been a weak quarter, one of our LFS partners have actually paid us late that one payment of about a total of about INR9 crore to INR10 crores, which is supposed to come in December, actually came in January first week. And because of that, our December 31st debtor days have gone up a little bit and also impacted our operating cash-flow. So there is a working capital increase to the extent of INR8 crores to INR10 crores because of delay in payments from one of our LFS partners, which came in actually in January first week, which was supposed to have actually come in December.
Devanshu Bansal
Understood. And last question from my end, Gautam. So you’ve indicated that value of — so certain value-added products have done well, right, in this quarter. But ASP increase is almost like 5%, right? So what would be the contribution of such products in this quarter versus the base if you could just highlight?
Gautam Saraogi
So the answer I think, look, see, even our value-added products, right, we are not trying to price it very-high. We don’t want to price INR200 or INR300 yet like we’ve always maintained saying that we want to keep our pricing lower than INR1,000 because we are — we are mass premium, right? We have value premium. So that’s why you’ve not seen a very sharp increase, but the value-added products obviously has played a role. From a split perspective between legging and — value-added products, I’m not having it right now. I’m guesstimating it will be between — legging should be between 35% and 40. I don’t have the number right now. I’ll share it through SGA, but it will be around in that range.
Devanshu Bansal
So the looking would be around 35% to 40% of the sales. Okay. Okay. Okay, got it. Maybe I just wanted to understand as in — because the gross margin performance is really a very good. So I just wanted to understand again what is actually new products?
Gautam Saraogi
Certain products in the crowder category had a slightly higher GM and which has resulted in, but it has had a very small impact on the on the overall P&L. See, also one of the reasons of GM being a little higher is also the fact that EBO contribution has been higher than LFS contribution. So I think considering all that, I think 63% is the — between 62.5% to 63% is the real GM I would be looking at moving forward?
Devanshu Bansal
So I just wanted to sort of clarify, there is no one-off, right? So all of it is business performance in the gross.
Gautam Saraogi
It’s all business performance. There is no one-off at all.
Devanshu Bansal
Okay, understood. Thanks for taking my question.
Gautam Saraogi
Yeah, yeah. No problem. Thank you.
Operator
Thank you. The next question comes from the line of Aradna Jain from B&K Securities. Please go-ahead.
Aradhana Jain
Hi, thank you for taking my question. I have just two questions. One is a follow-up on the previous question on gross margin. How much of the gross margin increase would be because of product mix and how much would be because of the cotton prices benefiting you?
Gautam Saraogi
Pricing majorly — it seems very difficult to quantify in terms of numbers, but I think majorly it will be cotton prices led majorly. The product-led and the EVO led would be smaller contributions, but it will be majorly driven by — by cotton price.
Aradhana Jain
Okay. And my second question is on pledge. So again, I wanted to understand that we’ve been telling that we’ll eventually be reducing the pledge, but to the quantity in-quarter three, we’ve increased our pledge by, I think 1%. So any thoughts on that? Any sense on by when we expect the pledge to go down?
Gautam Saraogi
Yeah. Thank you. Thank you for this question. I was going to clarify this. See, we had — we had an urgent requirement within the family and we had to do this unfortunately. And this is — this also continues to remain short-term in nature. Now when will the old pledge and the new pledge get cleared, I will come back soon with timelines and I’ll give it to the market. Right now, I’m not having timelines in my hand. Unfortunately, I’m not having them, but the minute I have it, I will come back very soon with some timeline.
Aradhana Jain
Okay. Sure. Okay. Thanks.
Operator
Thank you. As there are no further questions, I now hand the conference over to the management for their closing comments.
Gautam Saraogi
I’d like to thank everyone for being part of this call. We hope we’ve answered all your questions. If you need more information, please free-to contact Mr from SGA, our Investor Relations advisors. Thank you so much.
Operator
Thank you. On behalf of Gold Fashion India Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.